This is a very basic post for the kids and for the people to explain the banking terminologies. Here is a conversation between Dad and Son explaining how the bank operates,
What are the implications of CRR, SLR, Repo Rate, Reverse Repo Rate and their impact on deposit rate, loan interest rate and on inflation?
Son: I have heard recently that Mr. Rajan has reduced Repo Rate by 50 basis points and everyone is saying that this is good for the market. Loan EMI may also come down. What is this rate cut means actually? I want to understand this.
Dad: To understand this you first need to know, how does a bank function. Continue reading “How does a bank operate?”
Some of my friends wanted to know more about the concepts and mechanics of time value, I have tried to put few examples along with it.
The process of discounting future cash flows converts them into cash flows in present value terms. Conversely, the process of compounding converts present cash flows into future cash flows.
Time Value Principle 1: Cash flows at different points in time cannot be compared and aggregated (i.e. added). All cash flows have to be brought to the same point Continue reading “Mechanics of Time Value :”